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Tag Archives: FLSA

Employees’ work schedules seem to be as fluid than ever. More and more, employers are bending to the employment market’s demand by allowing employees to work remotely from home and/or to reasonably set their own hours to accommodate personal obligations such as caring for children or loved ones. If done thoughtfully and effectively, these accommodations can lead to happier and more productive employees.

But it is not without potential pitfalls. A common concern for employers with employees who keep odd or fluid work schedules is whether they are required to compensate these employees for travel time away from home.

The answer, unfortunately, is not always clear. As employers know, the Fair Labor Standards Act (FLSA) requires employers to pay employees for their “work.” Over time and through the passage of subsequent legislation, Congress has clarified that employers are not required to pay their employees for time spent commuting from home to work. That is not compensable worktime, regardless of if the employee works at a fixed location or at different work sites.

But what about when an employee without a regular work schedule has to travel away from home for work? Must he or she be paid for time traveling to and from the destination?

The answer is a qualified “maybe.” The Code of Federal Regulations (CFR), 29 C.F.R. §785.39, provides that travel away from home is compensable worktime if and when it cuts across the employee’s workday. In such a case, the employee is just substituting travel for other compensable work activities, even weekends or dates the employee does not typically work. So if an employee has a regular work schedule – say, 9:00 a.m. to 5 p.m. – their time spent traveling during those times is compensable. Easy enough.

So what happens when an employee has no easily discernable, regular “workday?” How do employers determine what travel time is compensable – and what is not?

How to determine whether an employee has a “regular workday”

The Department of Labor (DOL) recently attempted to clarify employer obligations and offer them more certainty in potential wage and hour disputes arising in these situations. FLSA 2018-18.

Employers should be cautious in making any unilateral determination that an employee does not have a “regular workday,” even if the employee’s hours are not rigidly set. If challenged, the Wage and Hour Division (WHD) or a court will review employee time records with an eye to establish work patterns that such a “regular workday” existed that requires the employee to be compensated for travel time. So fair warning: just because an employee has a non-traditional schedule or work setup does not mean she does not have a “regular workday.”

Any determination that an employee does not have a “regular workday” should be the result of a situation-specific (hopefully, time-record-supported) analysis. Otherwise, it may not pass muster if challenged by employees seeking additional compensation.

The DOL provided several permissible methods to an employer to conduct this analysis:

Review the employee’s time records during the most recent month of employment. If they reveal typical work hours, the employer can consider those as normal hours going forward absent a material change in circumstances.

If there are not typical work hours revealed upon review of the employee’s time records, the employer can choose to average the start and end times of the workday.

If neither of the above methods reveal a typical workday, the employer can negotiate an agreement with the employee as to what the reasonable amount of time spent traveling falls within a regular workday and what time is otherwise compensable.

Each of these methods, if used reasonably, will shield the employer from an adverse finding by the WHD that the CFR was violated for not compensating employees’ travel only during work hours. Employers looking to reduce potential risk would be well advised to take heed of these recommended methods.

On April 12, 2018, the Department of Labor (DOL) issued an opinion letter addressing the intersection between the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA) when an employee needs multiple rest breaks throughout the day due to an FMLA covered serious health condition.

Employee working with clock in background

Background

The FLSA generally requires employers to compensate employees for all time spent working. Although the Act does not require employers to provide rest or meal breaks, it does regulate whether such breaks—if provided by the employer—must be paid as compensable working time. Specifically, breaks of up to 20 minutes are generally considered primarily for the benefit of the employer and must be paid.

The FMLA, on the other hand, provides eligible employees with up to 12 weeks of unpaid job-protected leave for employees with a serious health condition. FMLA leave may be taken incrementally and, in certain circumstances, in periods of less than one hour.

Employers are not required to pay for excessive breaks

What if an employee needs to take multiple breaks during the work day due to his/her serious health condition? According to Opinion Letter FLSA 2018-19, such breaks are not compensable because they are not “primarily for the benefit of the employer.” Importantly, however, the DOL noted that an employer must still compensate the employee for breaks she would have received regardless of her serious health condition. To illustrate this point, the DOL provided the following example:

[I]f an employer generally allows all of its employees to take two paid 15-minute rest breaks during an 8-hour shift, an employee needing 15-minute rest breaks every hour due to a serious health condition should likewise receive compensation for two 15-minute rest breaks during his or her 8-hour shift.

Employer takeaway

Employers can rest easy knowing that they do not have to pay employees for unlimited rest breaks simply because they are necessitated by an FMLA-approved serious health condition. Employers should carefully administer and track any such breaks to ensure compliance with both the FMLA and FLSA—along with any applicable state or local laws (e.g., local paid sick leave laws and required paid rest breaks).

On Friday, the Department of Labor abandoned its six-part test for determining whether an intern must be paid, and replaced with the more employer-friendly “primary beneficiary test.” This announcement came less than a month after the Ninth Circuit became the fourth federal appellate court to expressly reject the DOL’s six-factor test in favor of the primary beneficiary test.

Background

Under the Fair Labor Standards Act (FLSA) employers must generally pay employees minimum wage for all hours worked, and overtime for all hours worked over 40 in a week. The FLSA, however, exempts certain individuals from these requirements, including bona fide interns. To determine whether an intern was bona fide, the DOL introduced a six-factor test in 2010, which required that:

The internship was similar to training that would be offered in an education environment;

The internship experience was for the benefit of the intern;

The internship was not displacing a regular employee;

The training provide by the employer to the intern may have impeded the employer’s operations;

The intern was not expecting a permanent position at the conclusion of the internship; and

Both the employer and the intern understand that there was no compensation.

“interns wanted” sign

According to the DOL, if even one of these factors did not apply, the individual was an employee — not an intern — and was required to be paid minimum wage and overtime.

The Primary Beneficiary Test

First articulated in 2015 by the Second Circuit Court of Appeals, the primary beneficiary test is a case-by-case approach that gives consideration to the following seven factors:

The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee — and vice versa.

The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.

The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.

The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.

The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

Importantly, no single factor is dispositive, and the employee/intern distinction will be based on the unique circumstances of each case.

Bottom Line

While the primary beneficiary test will provide more flexibility for businesses preparing for the 2018 internship season, employers must still be careful in designing internship programs. As the above factors indicate, the primary beneficiary of any program must still be the intern — not the employer.

Over the past few years, cities, counties and local municipalities have been enacting laws and ordinances increasing the minimum wage and requiring paid sick leave for employees. While there have been growing pains with how these apply to normal hourly non-exempt employees and tipped servers, do these apply to motor carriers and employees who are truck drivers? This can be the most frustrating legal response of all, “it depends.”

In most cases, minimum wage laws enacted by states follow the Fair Labor Standard Act (“FLSA”) and provide exemptions for motor carriers. Indeed, under Section 12(b)(1) of the FLSA, employees whose duties, wholly or in part, affect the safety of operation of a motor vehicle and are involved in interstate commerce are exempt from being paid overtime. Whether a municipality’s minimum wage ordinance applies, depends on the language and rules of the ordinance. For example, the rules of the Cook County, Illinois minimum wage specifically state that a regulated motor carrier subject to subsection 3(d)(7) of the Illinois Minimum Wage Law is not a “Covered Employer” that would be required to pay covered employees the Chicago or Cook County minimum wage. Similarly, the rules of the City of Chicago minimum wage states that individuals employed for a motor carrier who are subject to the Department of Transportation regulation are not subject to the Chicago minimum wage.

However, paid sick leave laws and ordinances are different. Neither the Cook County, Illinois earned sick leave ordinance or City of Chicago earned sick leave ordinance have the same exclusion for motor carriers or truck drivers. While neither expressly states that motor carriers are required to provide paid sick leave to employees who are truck drivers, they also do not state that motor carriers or truck drivers are exempt. Due to the plain language exempting motor carriers and truck drivers from the minimum wage ordinances, there is a very strong argument that motor carriers are required to provide their employees who are truck drivers with paid sick leave.

Indeed, this interpretation is not unusual within the growing trend of states, cities and local municipalities expanding employee rights – including those of truck drivers. Currently there are 8 states and 30 cities and municipalities that have paid sick leave laws which include: Illinois (local), Washington (state and local), California (state and local), Arizona (state and local), Oregon (state and local), Minnesota (local), Vermont (state), Massachusetts (state and local), Pennsylvania (local), New Jersey (local), New York (local), Connecticut (state) and Washington, D.C. (local).

Bottom line, the different paid sick leave laws do not address or expressly exempt motor carriers or truck drivers from being subject to the law or ordinance. By not addressing or expressly exempting motor carriers and their employees, these laws are creating significant exposure for motor carriers that fail to make changes by providing employees who are truck drivers with the ability to earn paid sick leave or considering how those employees are being compensated. Certainly, with the patchwork of laws and nuances in each jurisdiction, it can be extremely frustrating and difficult to try and implement a globally compliant policy. Thus, special attention must be taken when crafting such policies and review by experienced counsel should be part of the process. Moreover, motor carriers utilizing truck drivers who are independent contractors or owner/operators should take particular pause to consider the increased liability from misclassification claims and the potential damages under the paid sick leave laws, in addition to any applicable minimum wage law or ordinance.

An employer who allows its employees the “flexibility” to self-schedule time off the clock must make sure that it is paying its employees for all time worked. And beware, under the Fair Labor Standards Act (FLSA), “hours worked” is not limited to only that time an employee spends performing his or her job duties. Short breaks of twenty minutes or less are also counted as hours worked and must be paid.

The Third Circuit Court of Appeals recently held as a bright-line rule: Where breaks of twenty minutes or less are in question, the time must be paid. The court adopted the U.S. Department of Labor policy rationale that “breaks of twenty minutes or less are insufficient to allow for anything other than the kind of activity (or inactivity) that, by definition, primarily benefits the employer.” There will not be a factual analysis, or a case-by-case determination. Simply stated, if an employee is at the worksite, and is taking time away from their work-related duties for twenty minutes or less, they must be compensated for that time.

In the case decided by the Third Circuit, the employer did not deny that it permitted its call-center employees to log off their computers and use their time free from any work related duties, but it refused to call those time periods “breaks.” Rather, the employer considered it part of a “flexible time” policy, in which employees could take an unlimited amount of unpaid time away from work at any time, for any duration, and for any reason.

The court rejected the employer’s attempt to characterize time in a way that deprived employees of rights they were entitled to under the FLSA and considered the time an employee spent logged off the computer as a “break.” The employer violated the FLSA by not compensating employees for breaks that lasted twenty minutes or less.

Bottom Line: This is a reminder to employers that all policies and procedures should be vetted by experienced labor and employment counsel. In addition, all time worked including break periods should be accurately recorded, not only to comply with the record-keeping requirements of FLSA, but to document any abuse.

Employers should also keep in mind that some states may have their own break requirements that employers in those states must follow. Therefore, it is imperative that employers review their break policies and check applicable laws to ensure compliance with both federal and state law.

Although federal wage and hour laws do not generally mandate employee breaks, and state laws may vary, a strict policy that forces employees to choose between getting paid and basic necessities such as using the restroom runs contrary to “humanitarian and remedial” purpose of the act and will violate the law. These kinds of short breaks must be compensated. The FLSA and corresponding state wage and hour laws are designed to protect employees, and will be liberally construed.

Years ago, providing cash to employees that declined benefits was fairly common. Over the past few years, increasing regulations have made that practice mostly obsolete. Then, on June 2, 2016, the Ninth Circuit added FLSA overtime implications to the list of gotchas.

We routinely receive questions from employers contemplating offering cash to employees that decline benefits. Non-exhaustive examples of the concerns are:

The option needs to be provided through a cafeteria plan

The cash amount may impact “affordability” under the ACA

The option cannot enable/require an employee to purchase an individual policy

The option needs to be offered to all eligible employees and not just a select few or those with high claims

Depending on the timing/structure of the payments, an employer can risk losing overpayments to employees that leave mid-year

With events such as marriage or birth of a child, employees can still exercise HIPAA special enrollment rights

Unintended consequences – individuals with high claims will not likely be the ones declining coverage

If this isn’t enough reason to change course, the Ninth Circuit, in Flores v. City of San Gabriel, confirmed that employers need to also account for overtime obligations under the Fair Labor Standards Act (“FLSA”).

The City offered a set amount to employees for purchasing benefits. An employee could decline coverage and receive the unused portion as an extra cash payment on her regular paycheck. In a case of “first impression” (i.e., where no court has decided the issue before), the court determined cash payments to employees should have been included in regular rate of pay and overtime calculations.

The City argued that payments should not be part of the “regular rate” because they were not for “hours worked” and similar to payments such as vacation or sick time. The court did not agree. Instead, the court held that a payment may not be excluded from the employees’ regular rate of pay where it is generally understood as “compensation for work, even though the payment is not directly tied to specific hours worked by an employee.” The court likened the payments to board and lodging which is not pay for “hours worked” but is still included in the “regular rate.”

The City also argued that the payments were not part of the “regular rate” because they were made “incidental” to a “bona fide” benefit plan. The City lost this argument for 2 reasons: 1) the payments were not to a third party; and 2) the payments were not “incidental” to the plan, as they represented more than 40% of contributions to the plan.

All of this begs the question – Can an employer still possibly structure a cash-in-lieu offering to its employees that is compliant with all state and federal laws? What is clear is that any employer offering or contemplating a cash-in-lieu option should immediately contact experienced counsel in order to verify compliance and/or for assistance in promptly remedying non-compliance.

Today, the U.S. Department of Labor (“DOL”) has announced that they are issuing a proposed rule to increase the minimum salary requirements under the Fair Labor Standards Act for exempt employees. A draft version can be found at: http://www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf. The final proposed rule will be issued in the Federal Register and will provide a comment period for the public.

The proposed rule sets forth guidance and requests comment on the following proposed changes:

Set the minimum salary level to qualify for the white collar exemptions at 40% of the national weekly earnings for full-time salaried employees ($921 per week or $47,892 annually but expected to increase to $970 a week and $50,440 annually in 2016);

Increase the minimum salary for Highly Compensated Employees to 90% of the national weekly earnings of full-time salaried workers ($122,148 annually);

Establish a mechanism for automatically updating the minimum salary to meet the exemption on a yearly basis. While the proposed rule sets forth different types of mechanisms for calculating the automatic update (using a fixed percentile of wage earnings or using the CPI-U (an economic indicator for measuring inflation)) they do not identify which mechanism will be utilized;

Increase the minimum salary level for exempt employees in American Samoa to $774 per week; and

Change 29 CFR 541.709 to increase the current base rate for employees in the motion picture industry from $695 to $1,404 per week.

As stated, this is a proposed rule that is subject to a required comment period. The rule will not go into effect until the comment period has ended. However, employers MUST be cognizant of the proposed salary increases and begin contemplating how this is going to affect your current workforce.

Further, while not proposing any current rulemaking on the issues identified below, the proposed rule requests public comment on the following:

Whether to allow non-discretionary, incentive bonuses and/or commissions to satisfy 10% of the standard salary requirement for the white collar exemptions and if such are allowed how often these bonuses/commissions must be paid (monthly or more frequently);

Whether changesshould be made to the duties test for thewhite collar exemptions including:

Whether employees should be required to spend a minimum amount of time performing work that is their primary duty for qualifying for the exemption and what that minimum amount should be, if any?

Should the DOL follow the California state model and require 50% of an employee’s time be spent performing the employee’s exempt primary duty?

Does the current duties test appropriately distinguish between exempt and non-exempt employees? Should the long/short tests be brought back?

Is the concurrent duties regulation for executive employees (allowing the performance of both exempt and non-exempt duties concurrently) working or should there be a limit on the amount of non-exempt work?

Whether the Department should add examples of additional occupations to provide guidance for employers in administering the exemptions?

Examples from employers in the computer and technology industries as to what additional occupational titles or categories should be included in the examples along with duties that would generally meet or fail the exemption.

These additional inquiries are indications that the DOL is looking to potentially make further revisions to the exemptions.

In Light of the Proposed Regulations, Employers Should Analyze the Following:

How many of your current employees will be affected by this new rule?

Is a salary increase for those who do not currently meet the salary requirement a plausible financial decision to the required increases?

Are there job positions that should now be reclassified as non-exempt and the employees will now be entitled to overtime if they work over 40 hours?

Tightening up policies regarding working overtime and working with management to limit the number of overtime hours worked for non-exempt employees.

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